Thailand has the potential to drive greater use of digital assets in the business sector, but a flexible and forward-looking regulatory framework is required to provide consumer safeguards and encourage innovation among operators.
Ripple, the San Francisco-based provider of crypto and blockchain solutions for businesses, views Thailand as an early mover when it comes to regulating digital assets.
The Digital Asset Emergency Decree was passed in 2018 to regulate digital asset activities, and Thailand's Securities and Exchange Commission (SEC) has had a licensing framework for exchanges in place since 2019. The SEC and Bank of Thailand have since progressively adapted regulations in line with market developments, across stablecoins, rules around advertising, and banks' digital asset activities.
More recently, the focus has been on consumer protection, and the SEC has issued rules that will restrict digital asset operators from offering lending and staking services in exchange for incentives, with digital asset service providers required to offer warnings highlighting risks associated with trading. In April 2022, the central bank and SEC restricted the use of digital assets as a means of payment. However, digital assets as a means of settlement can play a critical role in underpinning the financial systems of the future.
"We feel these regulatory measures are crucial for regulators and policymakers to set the 'rules of the road'. While it's vital to provide certainty and consumer safeguards, it's also important that regulators and policymakers take a leading role to encourage innovation, not stifle it," Rahul Advani, policy director for Asia-Pacific at Ripple, told the Bangkok Post.
"Given the accelerated pace of technology, what we recommend is for these regulatory frameworks to be forward-looking and flexible, providing regulatory certainty and consumer safeguards, and at the same time meet the goals of encouraging innovation and growth."
By doing so, the benefits of digital assets, including lower cost payments in real time and transparent and traceable ledgers, will be passed on to consumers and end-users, helping to reduce friction and inefficiencies in the existing financial system, said Mr Advani.
Digital assets are well-positioned to address the pain points, helping businesses to reduce their overheads and eliminate the need for pre-funding - Rahul Advani, policy director for Asia-Pacific, Ripple.
He acknowledged that it was also important to recognise that blockchain's immutability supports a variety of use cases.
By tokenising assets on the blockchain, exchange of these assets can be facilitated in a safe and seamless way. These include tokenising traditional financial products such as securities, and protecting property rights for tangible properties as well as intangible assets, such as digital rights via non-fungible tokens.
The Thai government has recognised these opportunities for tokenisation and has recently introduced a tax break for companies issuing investment tokens in Thailand, while the SEC has issued a consultation on utility tokens, said Mr Advani.
With its regional headquarters in Singapore, Asia-Pacific is one of Ripple's fastest-growing regions, and the company plans to continue this growth by strengthening its momentum with existing customers. For example, in 2020 Siam Commercial Bank completed over half a million transactions on RippleNet, which was a 300% growth for inbound remittance volume and a 600% outbound remittance growth year-on-year.
Amid an uncertain economic outlook globally, businesses are tightening their purse strings to drive bottom-line growth. Mr Advani said the company is seeing growing interest in the use of blockchain technology and digital assets to streamline business processes, including cross-border payments.
"Globally business-to-business [B2B] cross-border transactions are expected to exceed US$42.7 trillion by 2026, up from $34 trillion in 2022. The B2B payments landscape still continues to be burdened by legacy financial infrastructure," said Mr Advani.
"Digital assets are well-positioned to address the pain points, helping businesses to reduce their overheads and eliminate the need for pre-funding. Macroeconomic pressures will likely not only propel more companies to capitalise on blockchain-enabled payments, but also spur innovation in this space."